Top Trends in Mobile Commerce

Retailers are a worried lot today. While more people are using their mobile phones to order products, handsets are enabling price comparison and directing users to online sites to complete a purchase. There are mobile applications that allow users to scan barcodes, take a photo or search a product while in a store, and then spouts out the prices of online competitors. Popular price comparison applications like eBay’s RedLaser and TheFind had16 million and 1.4 million downloads in 2011, respectively, up from 6 million downloads for RedLaser and 1 million downloads for TheFind a year earlier. On 8th December last year, Amazon launched a promotion in US on its Price Check shopping app that gave customers 5%, or up to $5, if they checked the prices of those goods while browsing at a physical store. Such mobile applications are resulting in loss in sales for physical retailers. The chart below from Booz & Company shows that 15-20% consumers in US are already using smartphones for price discovery and comparison.

Convenience, Access and Discounts are three reasons for growing popularity of electronic commerce. Mobile devices go a step further in providing convenience and have better enabling technologies than a computer. A mobile device is ubiquitous and is well integrated to context of location, time and people. This makes me believe that the next wave of digital commerce will be on mobile phone. As per Forrester report in June’11, the mobile commerce is expected to reach $31 billion by 2016 in the US. Globally, the mobile commerce could reach $119 billion by 2015 as per ABI Research. The projections made for mobile commerce do not include the mobile influenced sale which my opinion is much larger than the actual sale. A large number of people might visit a retail store due to a coupon they received on their mobile which technically is not commerce but to my mind should be included in the potential. According to Forrester, by 2014, 53% of sales in the US would be influenced by the internetand mobile would have a large role to play. Given the fact, 44% of mobile users in the America have smartphones and over a quarter users globally have smartphones (source Nielsen), the mobile commerce is here to stay!!!

What is driving the Mobile Commerce?

Apart from the increasing smartphone penetration, the entrepreneurial activity in this area is fueling the growth of mobile commerce. In the last few years, the emergence of mobile applications has pushed the capabilities of a mobile phone to the maximum. Mobile applications are not only utilizing the features of the mobile but have also increasing the consumption of software on the mobiles. Simple mobile application user interface is making it simple for consumers to search and adopt digital commerce on mobiles. Mobile phones may have a small screen but are very handy when you are on the go. Many consumers do impulse buying which means that when they are leaving home, they have no idea what they are going to buy and where they are going to buy. Mobile Marketing can therefore influence them significantly if there is a good deal available and that deal can be communicated at the right time. Context based advertising is becoming a big driver for mobile commerce. Another factor that is working in favor of mobile commerce is the fact that the consumers today are more comfortable in using a mobile phone and using their credit cards for electronic transactions.

Top Ten Trends in Mobile Commerce

The promise of mobile marketing is its ability to reach the right consumer, at the right time, and in the right place—including at the very moment and point of purchase. The potential power of mobile is further magnified when you consider that smartphone users spent most of the time on social networking applications, like Facebook, when interacting with their devices. The term “So-Lo-Mo” (for social, local, mobile) has been coined to refer to this opportunity. The trends below reflect the mobile commerce opportunity not only from the actual transaction perspective but also include the sales that gets influenced by a mobile phone.

1. Proliferation of Shopping Applications In the last few years, a lot of shopping applications have come up from eBay to Amazon to Bestbuy to Macy’s on iOS and Android platforms. These applications are taking advantage of the mobile features like context (location, time and people) which have made it easier for the consumers to use them. As a result, Forrester estimated that in 2011, over 24% iPhone users and 21% Android users used a shopping application

2. New and Diverse Mobile Advertising Formats One of the key development in the last few years has been the maturity of mobile advertising. The mobile advertising has moved from banner advertising to coupons, real time call to action, last minute deals, etc. Real time access to potential customer makes the advertising meaningful and interested audience can react spontaneously to the deal. Mobile coupons have a redemption rate of 15% to 40%. Compare this to traditional print coupons, which are redeemed at less than 2%. Imagine a cinema hall giving last minute discounts by broadcasting the deal to the people in the vicinity if it finds the hall half full. Recently, MacDonald’s promoted the geotargeted mobile ads within Pandora’s iPhone application. The mobile ads recognize the user’s location and show them how far away the nearest McDonald’s location is. As per Gartner report, the global market for mobile advertising will double in size in 2012 from $6.6 billion in 2011. By 2015, the market will be worth $20.6 billion, but will still have much further to grow beyond that.

3. Growing use of social media/ social commerce There is overwhelming evidence that people trust their friends more than the claims made by the retailers selling them and hence integration of social media is a definite boon to mobile commerce. People look for reviews and recommendations from their friends and other consumers and in exchange are willing to share their network with the retailer. IBM recently released a study that showed that consumers are more than willing to share with retailers through social networks. In exchange for a better, more personalized shopping experience, consumers will tell all about their media consumption (75%); age, race, gender, and income (73%); name and address (61%); and lifestyle details such as hobbies and other interests (59%). Social commerce and mobile has been the biggest trend of mobile commerce

4. Growing popularity of Local Commerce Social-Location-Mobile are the buzz words these days. Services like Foursquare and Facebook Places are offering deals based on loyalty by using the check-in functionality. If a person is going to a particular bar more often, then the bar tender can figure out the loyalty based on the number of check-ins that the person has done in that bar and can therefore offer a suitable offer. Shopkick goes a step further that gives incentives on footfalls and hence driving footfalls into a store. This way the mobile phones are driving online traffic to offline stores. Group Buying sites like Groupon and deal coupons are contributing to the popularity of local commerce. Almost all the popular deal sites have mobile applications and they have seen steady increase in traffic from the mobile phones. 50% of Groupon’s business is expected from mobile in next two years.

5. Increasing use of Mobile Phones to get Product Reviews/Information Mobile phones are helping the consumers to make informed decisions while they are in a store. Last year nearly half the consumers in the US used their mobiles to look for product reviews. The consumers used the bar code readers to get the product information.

6. Proliferation of Price Comparison Applications Price comparison applications from eBay, Amazon and TheFind are becoming a real threat to the physical retailers. Many customers when they walk into a store are using these applications to find the price on an online store or even the other physical stores in the vicinity. The retailer loses the sale in case the customer is able to find a better deal somewhere else. Earlier in the absence of information, the conversion of a walk-in customer was much higher. The chart below from Comscroe shows that pricing is important for the consumers and the stores are having lost sale due to price comparison applications.

Real time inventory availability for many physical stores is being used by applications like Pricegrabber to get the best deal available across the city.

7. Enhanced In-store Experience using Mobiles Stores can improve the in-store experience through product recommendations tailored to individuals based on their previous purchases, as well as items they have scanned and loyalty card data. As mobile commerce continues to rise, so does the importance of the in-store shopping experience. Along with convenience, personalization and savings, retailers need to start planning for what is next: the push for sustaining customer loyalty and mobile payment solutions. Retailers are already flocking to mobile marketing, with 91 percent either having a mobile strategy in place or in the process of developing one, according to a new report from Shop.org. Overall investment in mobile is also growing. Retailers invested $34.8 million in mobile last year and $14.6 million in tablets. These numbers increase significantly for 2011, with retailers planning to spend $220.9 million on mobile and $14.6 million on tablets.

8. Evolving Mobile Payment Technologies New mobile payment services are proliferating across the world which are helping the cause of mobile commerce. Square is one such service and has been the fastest service to reach $1 billion billing. Square enables mobile phones to accept credit cards thereby removing the need for a POS. Even Paypal, eBay and Amazon have reported higher mobile sales over the last couple of years. Another technology that is finally shaping up is Near Field Communications (NFC) that allows the users to make proximity payments at merchant stores. Visa and Google are also trying hard to get a pie of the lucrative mobile payments value chain.

9. Growing popularity of Lead Generation applications It is very often that we plan to go out for dinner but want to find out the table availability before we reach there. Opentable is an application that is now being used by millions of people to book a table in the restaurants. Just as Opentable makes it possible to book a table in advance, Styleseat is helping consumers make appointments at parlors and spas. Similarly, Zocdoc is helping people find a local doctor and make an appointment with him. I see this as a strong trend going forward as it is targeting a real need of consumers and not replacing any other traditional channel.

10. Synchronized Experience A nascent trend that is emerging is marrying the offline and online world by retailers. This means one can order grocery online and then pick it up from the store thereby saving time and yet getting the delivery when it is required. There can be very many examples where internet is being used to enhance physical experience. This has the power to remove the inconveniences of offline commerce and yet include the joys of the physical commerce.

Finally, I would leave you with an interesting video from Forrester on multi-channel shopping

If you liked this article, you may consider subscribing to Telecom Circle to get all the articles in your mail box

Enter your email address:
Disclaimer: The views expressed in this article are my personal views and do not reflect the views of my employer.

Related Posts:

About The Author

Mohit

Mohit is a telecom professional with rich experience over 15 years. His expertise is in the area of strategy and planning and his work experience includes stints with two of Big 5 consulting organizations, a telecom operator and a handset vendor. Mohit can be reached at mohit@telecomcircle.com